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Exam 10: Liabilities: Current, Installment Notes, and Contingencies

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Question 41

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Scott Company sells merchandise with a one-year warranty. Sales consisted of 2,500 units in Year 1 and 2,000 units in Year 2. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in Year 1 and 70% in Year 2 for the Year 1 sales. Similarly, 30% of repairs will be made in Year 2 and 70% in Year 3 for the Year 2 sales. In the Year 3 income statement, how much of the warranty expense shown will be due to Year 1 sales?

A) $6,000
B) $14,000
C) $20,000
D) $0

E) C) and D)
F) A) and D)

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Question 42

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For a current liability to exist, the liability must be due usually within a year and must be paid out of current assets.

A) True
B) False

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Question 43

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Dixon Sales has seven sales employees that receive weekly paychecks. Each earns $10.25 per hour and each has worked 40 hours in the pay period. Each employee pays 12% of gross in federal income tax, 3% of gross in state income tax, 6% of gross in social security tax, 1.5% of gross in Medicare tax, and 0.5% of gross in state disability insurance. Journalize the recognition of the pay period ending January 19 which will be paid to the employees January 26.

The Core Company had the following assets and liabilities as of December 31: Calculate the current ratio, working capital, and quick ratio. Round ratios to one decimal place.

Aqua Construction installs swimming pools. It calculates that warranty obligations are 5% of sales. For the year just ending, Aqua's sales were $1,500,000. Previous quarterly entries debiting Product Warranty Expense totaled $48,700. Determine the estimated warranty expense for the year and make the journal entry necessary to bring the account to the needed balance.

According to a summary of the payroll of Scotland Company, salaries for the period were $500,000. Federal income tax withheld was $98,000. Also, $15,000 was subject to state (5.4%) and federal (0.8%) unemployment taxes. All earnings are subject to social security tax of 6.0% and Medicare tax of 1.5%.​ (a)Journalize the entry to record the accrual of payroll. If required, round your answers to the nearest cent.(b)Journalize the entry to record the accrual of payroll taxes. If required, round your answers to the nearest cent.​

The journal entry used to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is

On August 1, Batson Company issued a 60-day note with a face amount of $140,000 to Jergens Company for merchandise inventory. (Assume a 360-day year is used for interest calculations.) a.Determine the proceeds of the note assuming the note carries an interest rate of 6%. b.Determine the proceeds of the note assuming the note is discounted at 6%.

The payroll register of Seaside Architecture Company indicates $970 of social security and $257 of Medicare tax withheld on total salaries of $16,500 for the period. Federal withholding for the period totaled $4,235. Prepare the journal entry for the period's payroll.

The following totals for the month of April were taken from the payroll register of Magnum Company. Use this information to answer the questions that follow.​ -The following totals for the month of April were taken from the payroll register of Magnum Company: The entry to record accrual of employer's payroll taxes would include a

The following totals for the month of April were taken from the payroll register of Magnum Company. Use this information to answer the questions that follow.​ -The entry to record accrual of employer's payroll taxes would include a

Wright Company sells merchandise with a one-year warranty. This year, sales consisted of 2,000 units. It is estimated that warranty repairs will average $15 per unit sold, and 30% of the repairs will be made this year and 70% next year. In this year's income statement, Wright should show warranty expense of

The borrower issues a note payable to a creditor.

Thomas Martin receives an hourly wage rate of $40, with time and a half for all hours worked in excess of 40 hours during a week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the gross pay for Martin?

Martin Services Company provides its employees vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $39,500 for the period. The pension plan requires a contribution to the plan administrator equal to 9% of employee salaries. Salaries were $750,000 during the period. Provide the journal entries for (a) the vacation pay and (b) the pension benefit.

On June 1, Davis Inc. issued an $84,000, 5%, 120-day note payable to Garcia Company. Assume that the fiscal year of Garcia ends June 30. Using a 360-day year, what is the amount of interest revenue recognized by Garcia in the following year? When required, round your answer to the nearest dollar.

The following information is for employee Ella Dodd for the week ended March 15.Total hours worked: 48 Rate: $15 per hour, with double time for all hours in excess of 40 Federal income tax withheld: $200 United Fund deduction: $50 Cumulative earnings prior to current week: $6,400 Tax rates: Social security: 6% with no maximum earnings.Medicare tax: 1.5% on all earnings.State unemployment: 5.4% with no maximum earnings; on employer Federal unemployment: 0.8% with no maximum earnings; on employer (a)Determine (1) total earnings, (2) total deductions, and (3) cash paid.(b)Determine each of the employer's payroll taxes related to the earnings of Ella Dodd for the week ended March 15.

Journalize the following, assuming a 360-day year is used for interest calculations: Apr. 30 Issued a $150,000, 30-day, 6% note dated April 30 to Misner Co. on account.May 30 Paid Misner Co. the amount owed on the note dated April 30.

On January 5, Thomas Company, a calendar-year company, issued $1,000,000 of notes payable, of which $250,000 is due on January 1 each of the next four years. The proper balance sheet presentation on December 31 is

Match the following terms or phrases in (a-g) with the explanations in 1-8. Terms or phrases may be used more than once. -Probable likelihood and estimable liability A)Current ratio B)Working capital C)Quick assets D)Quick ratio E)Record an accrual and disclose in the notes to the financial statements F)Disclose only in notes to financial statements G)No disclosure needed in notes to financial statements